🎯 New Year's Resolution- Be a better investor!
Being a better investor has so many wonderful long-term benefits, and none are truly “specifically” about your net worth. In fact, being a better investor can lead to:
- 💰 Achieving financial independence sooner
- 🌱 A significant increase in quality of life
- 🧠 Peace of mind-mental health benefits
- ⏳ More control of how you spend every minute of each day
📘 Here are a few tips we have learned along the way to becoming a better investor:
🎲 Understand the rules of the game. If you are listening to advice from any third party make sure you understand their incentives and agenda. Beware of the typical Wall Street Sales machine; that is, this game is to incent investors to constantly change their investments and strategies, often promoting complicated products that are illiquid and have high hidden fees.
⏰ Appreciate the value of time in the market. Compounding is the 8th wonder of the world. You will be amazed by the wealth that you can create if you are patient and disciplined enough to allow the time needed to benefit from compounding. BUT, to achieve this, you will face many obstacles! Patience, low turnover, and taking a long-term approach to investing are kryptonite to most of Wall Street! You will be pushed, coerced, and incentivized to stray from the course!
🧘 Manage your emotions. This is arguably the biggest mistake we see. Investors need to avoid FOMO and recency bias; don’t be too optimistic when markets are surging and do not panic in down markets. Temperament is a mispriced asset! You must be able to avoid recency bias for long-term success. Don’t get caught up in the day-to-day hype. Everyone knows someone who has “made a killing” in this stock or that fancy product. It seems “every” market pundit you hear or read in the media has made all the correct predictions (every one of them!). But yet somehow, 2025 was once again a year where the average actively-managed fund lagged their respective index by a wide margin.
⚖️ Don’t confuse your time horizon and risk tolerance with someone else’s. Think more about where you are in your financial life: Do you still need to take a lot of risk to achieve your goals? How much time will you have to recover if you experience a big drop in your portfolio before you are drawing on it? As your portfolio grows and you get older, could you really stomach a large decline in your portfolio? Your portfolio should reflect your OWN time horizon and your OWN risk tolerance, not that of a friend, a relative or someone that you may have read about.
🌐 Increase your odds of success by building a REAL diversified portfolio. A REAL diversified portfolio will always hold a position that may be lagging whatever the “best” asset class or index is at that moment. Today, the best performer has been the S&P 500 Index, but--news flash- it has not always been the case! Anyone with real long-term experience and a healthy respect for risk and markets knows that there have been 3 times in history that the S&P 500 has lagged Treasury bills….for a decade!
Today, because of recency bias, too many investors think that this will never happen again. Too many investors just scan their holdings, isolate the worst performer, sell it and place the proceeds into the best performer in the portfolio! This is not building a diversified portfolio! This type of FOMO--chasing recent performance—is more likely to be a detriment to your portfolio and impede your gains over the long term.
When evaluating investments, you should carefully analyze the holding to make sure you understand how it would fit into your strategy. For example, someone asked us to look at a “balanced” fund for them. One would logically think that a balanced fund is, well, “balanced,” right? Maybe a good mix of stocks and bonds, with a diverse allocation to the stock holdings? Not exactly. This particular fund held---wait for it----all the Magnificent 7 tech stocks, representing 30-35% of the entire fund! Hardly a truly balanced fund. Further, tracking it versus the S&P showed a fund that is heavily correlated to the index, thus providing investors with only slightly less risk. In other words, it held absolutely zero benefit for the investor to own this fund, which was merely a watered-down S&P 500 fund!
🚀 Take advantage of the biggest advantage we have as individual investors. So-called “professional investors” (such as the manager of the above “balanced” fund) are measured on very short-term results. The above-referenced manager was probably threatened with Career Risk if he/she did not own more and more of the Mag 7; unfortunately, during this market period, most investors cannot “outperform” if they are materially underweight these stocks. But, as individual investors, we don’t have to worry about this short-term scrutinization!
Similarly, we recently saw a clip of some “professionals” discussing how Nvidia’s stock has gone nowhere in 6 months! 6 months? Big deal! Nvidia’s stock is arguably the best stock of all time and yet again, because of this obsession on Wall Street with “short-termism” and need to constantly generate fees from trading activity, they were questioning why an investor would continue to own Nvidia because it hasn’t moved in 6 months. Wow….
📊 Understand what the words “outperform” or “underperform” should mean to you. As Nick Murray said, “If you outperform the market by 2% but still run out of money did you win?? All that matters should be whether you adhered to your strategy, achieved the desired return you needed relative to the risk you were comfortable taking and succeeded in your financial plan.
Again, along the way, you will be pressured and coerced to focus more on how each of your investments outperformed or underperformed something else, but that is how the Wall Street Sales machine works—continuing to generate more and more fee income from more and more activity!
💪 Do you have the emotional fortitude, patience, and discipline to follow through and execute on a well thought out plan?? If so, your future self will thank you.
Disclosures: This is not an offer or solicitation for the purchase or sale of any security or asset. While the information presented herein is believed to be reliable, no representation or warranty is made concerning its accuracy. The views expressed are those of NCM Capital Management, LLC and are subject to change at any time based on market and other conditions and NCM does not undertake to update or supplement its newsletter or any of the information contained therein. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable. There is no guarantee that the investment strategies discussed above will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision. Investment advisory services are offered through NCM Capital Management, LLC, an SEC-registered wealth advisory firm domiciled in New Jersey. This communication is not to be construed or interpreted as a solicitation or offer to sell investment advisory services. For additional information about NCM Capital Management, LLC, you may request a copy of our disclosure statement as set forth on Form ADV. Readers are encouraged to consult with their own professional advisers, including investment advisers and tax/legal advisors. NCM Capital Management, LLC does not provide legal or tax advice. NCM Capital Management, LLC can assist in determining a suitable investing approach for individuals, which may or may not resemble the strategies outlined herein.